EDITORIAL: Governor State Bank of Pakistan Jameel Ahmed while attending the gong ceremony on the Pakistan Stock Exchange highlighted three relatively positive economic indicators today as opposed to the same period last year. First, remittance inflows had reached a historic high of 4 billion dollars in March which when projected for the current year would give a total of 38 billion dollars, widening the gap with export revenue, the other major desirable form of earning foreign exchange. The Finance Division monthly update and outlook for March noted July-February exports of 21.82 billion dollars as opposed to remittances of 23.96 billion dollars. The key question is whether this rise in remittance inflows is sustainable and the response is that in March two major factors may have accounted for a rise in inflows; notably, it was the holy month of Ramazan when remittances are traditionally higher than in other months and the border-crossing with Afghanistan and also Iran remained closed for most of the month which no doubt throttled outflows from leakage. Be that as it may, this widening gap in favour of remittances against exports, should motivate the SBP and the government to focus on incentivizing and facilitating such inflows and a cost-benefit analysis needs to be carried out to weigh the efficacy of incentives meted out to remitters as opposed to exporters. Second, the Governor expressed satisfaction at low inflation (0.7 percent last month), which the monetary policy committee which he chairs warns yet again in its 10 March 2025 communication is subject “to risks emanating mainly from volatility in food prices, timing and magnitude of energy price adjustments, additional revenue measures, protectionist policies in major economies and uncertain outlook of global commodity prices,” forecasting it to stabilise within the range of 5 to 7 percent. Foreign exchange reserves and concerns for default, he claimed, have receded and that is indeed a fact; however, sustainability of both these positive indicators is subject to the country remaining on an International Monetary Fund (IMF) programme for two reasons: (i) 16 billion dollars of roll-overs are a major component of the reserves, that would dry up as the three roll-over countries – China, Saudi Arabia and the UAE – have made it repeatedly and abundantly clear to the government that an extension is subject to the country being on a rigid IMF programme, and (ii) without the IMF support, read the staff level agreement on the second review, which is contingent on implementing conditions that are politically extremely challenging. Reports suggest that the Fund is insistent on the government taxing the traders as pledged last year, a pledge that remains unfulfilled, and taxing the rich farmers effective January 2025 to be implemented from 1 July 2025. The Governor also claimed that investor confidence had been restored no doubt based on a survey that is routinely carried out by the SBP but which is not reflected in large scale manufacturing data that remains in the negative territory. In the latest monetary policy statement this was acknowledged: “latest pulse surveys show improved consumer and business confidence. Nonetheless, the Committee noted that the momentum depicted by these indicators is yet to fully reflect in LSM data, which contracted by 1.9 percent in H1-FY25. The drag in LSM growth is mainly coming from a few low-weight sub-sectors, which have more than offset the positive momentum in key sub-sectors like textiles, pharmaceuticals, automobiles and POL.“ Not mentioned is the fact that the LSM data has been in the negative realm since 2022 and it would have been helpful if the exact time lag had been projected. The Governor concluded that macroeconomic stability has been achieved – a claim that is echoed by the cabinet members as well as by stakeholders and profiteers operating in the wholesale and retail market or, in other words, all but the common man who have been unable to benefit from the massive decline in inflation due to a wage freeze in private sector due to the prevailing challenging economic conditions, a freeze that is not applicable to those who draw a salary from the treasury, and the evidence for this is obvious as Pakistan is currently suffering a poverty level of 42 percent as per the World Bank. Macroeconomic stability would prove to be elusive if the sustainability of improved performance is not ensured or inclusive as that may fuel socio-economic unrest. Copyright Business Recorder, 2025